by Cullen Roche
John Hussman has some good data from Nautilus Capital regarding the average duration of cyclical bull markets within secular bear markets. If we indeed remain in a secular bear market then the current cyclical bull run could be nearing its end or even extended:
“You might expect that when the market is gradually working down from a high level of overvaluation, bull markets would tend to be shortened, and bear markets would tend to be deeper. In fact, that’s exactly what we observe. As the guys at Nautilus Capital note, cyclical bull markets within secular bears have tended to average just 26 months, with an average gain of 85%, while cyclical bears within secular bears have averaged 19 months, with steep average losses of -39%. So market cycles tend to be truncated during secular bears, averaging a full bull-bear duration of just 3.75 years, for a full-cycle average gain of just over 12% (3.3% annualized). Of course, fundamentals still tend to grow faster than 3.3% over the cycle, resulting in valuations that are lower at each bear market trough, even if prices are higher in absolute terms. I recognize that outcomes like these are unpleasant and inconvenient to contemplate, but denying the possibility doesn’t make anyone a better investor.”
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